Trucking companies have been a mainstay of the U.S. economy (and much of the world’s economy) for decades. These organizations balance logistics, customer service, and a complex patchwork of regulatory measures, all so they can deliver the products shippers want – and consumers depend on.
But one of the biggest struggles freight carriers of the trucking modality face is budgeting their expenses. While the most successful companies usually have specialists to help them keep their finances in order, those specialists can’t do a thing about constantly rising costs for trucking’s most crucial resources.
One such resource is fuel. Despite taking big steps toward putting electric semis on the roads, carriers are still very much dependent on diesel at the moment. This means every time the cost goes up, even if only by a few cents, carriers must take the increase into careful consideration.
For companies with hundreds of trucks that cover thousands of miles over the course of a single workday, even a modest increase in diesel pricing is cause for concern. But there’s another issue trucking companies are facing – a rising cost of labor.
That cost can be attributed to the ongoing driver shortage, which has already started to cause an increase in consumer products. Without a big enough supply of talent to deliver freight, carriers must raise prices to deal with the high demand and to make sure they can retain the talent they do have. This results in many shippers passing the increased costs to their own customers.
Mike Card, president of Combined Transport of Central Point, spoke about the shortage. He said: “We have equipment sitting right now because we can’t find drivers. We see this happen when the economy is strong. We lose drivers because of new construction or other local jobs. Right now, I can raise my prices because the economy is strong.”
Labor is expensive. Driver costs include wages, as well as training, payroll management, health insurance, workers’ compensation, liability insurance, and more. High costs have necessitated the use of desperate measures, which in this case is something many drivers have said should be a common-sense solution – raising wages.
Trucking companies are bumping up their pay offerings in an effort to attract and retain more talent. It may not be an overnight solution, but it could be their only hope for creating a work environment that attracts newcomers and discourages turnover.
As for diesel prices, they could reach $3.50 by the end of the year. This means higher operating costs for trucking companies, and thus higher rates for their services. XPO Logistics, one of the nation’s biggest carriers, just introduced a 5.9 percent rate increase.
Fuel and labor are two things trucking can’t do without. But given the sharp increase in costs for both, coupled with surging freight demand, carriers are in a tough spot. They’re wise to take advantage of the increased business now, but without full rosters, they can only do so much.